The Euro dilemma between liquidity and budget discipline - and both goals could be achieved (mit Bild)

Brussels (ots) -

- Cross reference: Picture is available via epa european
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Greek haircut and saving programs alone do not solve the Euro
problem and will result in continued credit crunch that may damage
growth in Europe. Europe's 500, therefore, proposes an approach that
ensures budget DISCIPLINE + LIQUIDITY at the same time and thereby
improves the growth prospective in Europe. This means in summary:

- Creditor participation only for foreigners, citizens need to be
able to rely on their own country bonds.

- The EFSF/ECB should buy bonds of Euro governments at market
price and make a profit while restructuring with gliding interest
schemes.

- EFSF/ECB only need to perform a temporary buffer function.

- Financial markets will refocus on the real economy and have no
more reason to freeze in paralysation like some bond markets.

- The Euro zone can give itself the same global capacity to act
like the US and China.

The haircut alone waived the option of creating a flexible
instrument that encourages budget discipline. We expect strong or
passive resistance against recapitalization because it dilutes
shareholders. A legal framework is missing to oblige banks to
replenish their equity in order to maintain its lending capability.
Therefore, we expect a credit crunch for domestic capex financing
which in the long-term has damaging consequences.

Therefore, Europe's 500 entrepreneurs for growth propose:

Creditor participation (for banks, institutions and individuals)
should be limited to foreign lenders/investors instead of asking
creditor participation from everyone. This risk should be limited to
foreign investors who wanted to benefit from higher interests than in
their own countries.

ECB funding of the EFSF for maintaining bond market liquidity
still allows incentives and penalties to enforce budget discipline.
We should now learn from the positive experience of keeping the banks
liquid in 2008 by now keeping the governments liquid. THE MARKETS
LOGICALLY NEED TO HEAR THAT THE EFSF (backed by the ECB) MAY BUY
GOVERNMENT BONDS AT MARKET PRICE IF THEY HAVE DROPPED TO THE EXTENT
THAT FRESH PRIVATE SECTOR FINANCING DRIES OUT.

EFSF intervention should be decided from time to time, but this
should be the job and the competence of the institutions. Politicians
should rely and empower the experts. The EFSF can then negotiate and
reschedule certain government debts. New bonds could be issued in
exchange to the maturing bonds. Citizens from the respective
countries will buy the new bonds and all three parties can benefit
from the discounted bond price: the stretched government, the EFSF
and the local citizen. "The looser is the international lender. Local
responsibility will grow like you can see it in the financially
strong nations', says Martin Schoeller, President of Europe's 500,
the association of the European growth companies.

Contact:

Martin Schoeller
President Europe's 500
email: petra.stadler@europes500.com
Tel.: +49 89 55277 106
www.europes500.eu